Initial processing of Athabasca oil sands obtained from surface mining yields stable water-in-bitumen emulsions. When the bitumen is diluted with naphtha to reduce its viscosity and density, nearly complete separation can be obtained with a suitable coalescer in the absence of clay solids. However, a rag layer forms between the clean oil and free water layers when clay solids are present. We show here that complete separation in this case can be obtained by (a) adding a small amount of sodium silicate during initial emulsion formation to make the solids less oil-wet, (b) removing the clean oil formed following subsequent treatment with a demulsifier and adding sodium hydroxide or sodium silicate with shaking to destroy the rag layer and form a relatively concentrated oil-in-water emulsion nearly free of solids, and (c) adding hydrochloric acid to break the oil-in-water emulsion.